Transportation industry fleet managers in emerging markets have the opportunity to avoid mistakes made by their equivalents in developed markets and to by-pass the use of expensive proprietary technologies that have prevented developed markets from operating efficiently.
In the UK, for example, 28% of all heavy goods vehicles run empty, the average lading factor is 60% with some vehicles remaining completely unused. In the UK we have seen total optimisation of dedicated fleets as an impossible task. Unless the Supply Chain Owner’s (SCO) business is in a particularly dense geography where backhauls are always available, there will always need to invest in surplus assets running empty miles at less than optimum utilization. Faced with these issues and highly variable demand, SCO’s fleet managers have reduced their own fleets and outsourced more work to independent subcontracted hauliers. However, using these subcontractors without proper controls often leads to poor customer service and negatively affects the SCO’s competitive position.
For the small independent haulier, finding work can be equally as difficult, with each SCO asking them to install thousands of dollars’ worth of proprietary in-cab and proof of delivery technology for a supply of work that cannot be guaranteed.
Despite the expensive equipment, the Supply Chain Owner is still likely to suffer and pay a price for inefficiencies. Ever-growing back office teams are constantly on the phone trying to find someone, or anyone, willing and able to carry a load. Where a SCO does tie a haulier to its computer systems there is an immediate loss of efficiency. Part of the haulier’s fleet becomes dedicated to that SCO, with no opportunities for sharing assets with other supply chain owners. Hauliers resent being held to a single contract by one SCO and seeing their margins squeezed ruthlessly.
With the growth of mobile technology, emerging markets have the opportunity to avoid these problems. We foresee a solution to these problems that will not require investment in expensive computer systems, knowledge of optimization algorithms or mathematical genius. It will work on the simple operation of market forces and fits the transportation industry well. The key for the SCO will be in “optimising the use of other people’s assets through market forces, not optimising its own assets through mathematics”, with full control over service execution and costs. The key for the haulier is in having information readily available, wherever and whenever they want it - being fully aware of the need within the market and being able to intelligently match it with their capability to fulfill that need. The market place and its pricing will be transparent and liquid, maximising the opportunity to use all empty capacity at any time.
The creation of such a market enables collaboration based on the fundamental desires of both Supply Chain Owner and Carrier to make money and profit. Such optimization will work for the entire industry and countries, not just a single company, enhancing efficiency and profitability for all parties. At Stratus, we have developed a detailed roadmap for implementing this vision and would welcome the opportunity to discuss it with interested parties.
Nigel Devenish, based in Ireland, is a Managing Director at Macdui Business Solutions, a business providing knowledge capital and thought leadership solutions to businesses both nationally and internationally since April 2010.
Corporate TrainingsNigel DevenishOctaratransport operations
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